Satish Kumar vs Prithvi Singh And Ors
2022 Latest Caselaw 17131 P&H

RSA-3836-2017 (O&M)                                              --1--

223   IN THE HIGH COURT OF PUNJAB AND HARYANA AT
                     CHANDIGARH

                                              RSA-3836-2017 (O&M)
                                              Reserved on:12.12.2022
                                              Pronounced on:19.12.2022

Satish Kumar                                               ....Appellant.

                           vs.

Prithvi Singh and others                                   ....Respondents.

CORAM: HON'BLE MR. JUSTICE HARKESH MANUJA

Present:    Ms. Amrita Nagpal, Advocate,
            for the appellant.

            Mr. Rakshit Gupta, Advocate for
            Mr. Rakesh Gupta, Advocate,
            for the respondents.

            *****

HARKESH MANUJA J. (Oral) By way of present regular second appeal filed at the instance of

appellant-defendant, challenge has been made to the judgment and decree

dated 04.05.2017 passed by the court of learned Additional District Judge,

Kaithal, whereby a decree for recovery of Rs.4,50,000/- without interest has

been passed in favour of respondents-plaintiffs in a suit for specific

performance.

2. Brief facts of the case are that based on an agreement to sell

dated 23.01.2007 (Ex.P1), respondents-plaintiffs filed a suit for possession

by way of specific performance regarding 2500 square yards of land against

the appellant-defendant with the averments that total sale consideration was

Rs.27,50,000/-, out of which, Rs.5,50,000/- was paid as earnest money and

10.05.2007 was fixed as the target date. The respondents-plaintiffs further

pleaded that on the target date, they along with the balance sale consideration

and the necessary expenses visited the office of Sub-Registrar, however, the

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appellant-defendant did not come present, resultantly, compelling them to

file the present suit.

3. Upon notice, appellant-defendant appeared and controverted the

stand taken by respondents-plaintiffs as regards their readiness and

willingness about the performance of the agreement in question, however, the

execution of agreement to sell dated 23.01.2007 along with the payment of

earnest money of Rs.5,50,000/-, besides, the quantum of total sale

consideration being Rs.27,50,000/- with 10.05.2007, the target date was not

disputed.

4. The Trial Court vide judgment and decree dated 30.09.2015,

dismissed the suit by holding that the respondents-plaintiffs were not ready

and willing to perform their part of the contract and, as such, were not

entitled for decree of possession by way of specific performance.

5. Aggrieved against the judgment and decree dated 30.09.2015,

respondents-plaintiffs filed first appeal. Although, the first Appellate Court

also declined to grant relief of possession by way of specific performance in

favour of respondents-plaintiffs, however, passed a decree for recovery of

Rs.4,50,000/- without interest in their favour being refund of reasonable

amount of damages for facing litigation for five years. It is the said judgment

and decree dated 04.05.2017, which has been impugned herein by way of

present Regular Second Appeal.

6. It has been contended on behalf of the appellant that in the facts

and circumstances of the present case, when it was sufficiently proved on

record that the respondents-plaintiffs were not ready and willing to perform

their part of agreement in question, the amount of earnest money was

required to be forfeited based on the terms of the agreement in question

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Ex.P1. She further submits that even the sending of notice dated 29.01.2008

at the instance of respondents-plaintiffs was duly responded to by the

appellant-defendant through reply dated 08.02.2008 calling upon

respondents-plaintiffs to come forward for execution of sale deed within a

period of 30 days thereof, however, neither the respondents-plaintiffs came

forward for the purpose of execution of sale deed nor even the fact of any

such reply/response dated 08.02.2008 by the present appellant-defendant was

ever disclosed by them in the plaint. Learned counsel for the appellant further

submits that even the suit was filed at the fag end of the period of expiry of

03 years from the date of target date, which again reflects the lack of

willingness on the part of respondents/plaintiffs.

7. Learned counsel for the appellant also submits that once the

respondents-plaintiffs failed to establish their readiness and willingness as

regards execution of agreement in question and this fact was duly proved on

record and even accepted by both the courts below, the forfeiture of earnest

money as per the terms of agreement to sell dated 23.01.2007 (Ex.P-1) could

not have been termed to be an act of undue enrichment. For the said purpose,

learned counsel for the appellant also places reliance upon the judgment of

Hon'ble the Supreme Court, in case of "Satish Batra vs. Sudhir Rawal",

reported as 2012 (4) RCR (Civil) 890.

8. On the other hand, learned counsel for the respondents-plaintiffs

submits that there was some dispute regarding the actual position of the

boundaries of the land in question as compared to the boundaries reflected in

the agreement to sell, which was the main reason for delay in filing the suit.

Learned counsel also submits that in fact there was no passage towards the

south of the land in question as depicted so in the agreement in question,

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otherwise, the respondents-plaintiffs were always ready and willing to

perform their part of agreement in question, throughout.

9. Based on the aforesaid submissions, learned counsel for

respondents-plaintiffs submits that since, there was material defect in the

property in dispute, as such, the forfeiture of earnest money was wholly

uncalled for and for this he places reliance upon a decision rendered by

Hon'ble the Supreme Court in case titled as "Haryana Financial

Corporation and another Vs. Rajesh Gupta, 2010(1) SSC, 655.

10. I have heard learned counsel for the parties and gone through the

paper book as well as the relevant record in the shape of agrement in

question (Ex.P-1) provided to me at the time of hearing, I find substance in

the submissions made on behalf of the appellant.

11. In the present case, the following question of law arises for

consideration:-

"Whether the forfeiture of earnest money under an

agreement is permissible, in case, the transaction fails on account of

default of the purchasers/vendee."

The afore-stated question of law is no more res-integra as the

same already stands expounded upon by Hon'ble the Supreme Court in

Satish Batra's case (supra). The relevant paragraphs No.17 and 18 of the

aforesaid judgment are reproduced hereunder:-

"17. Law is, therefore, clear that to justify the forfeiture of advance money being part of 'earnest money' the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non-performance, by the depositor. There can be converse situation also that if the seller fails to perform the

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contract the purchaser can also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply.

18. When we examine the clauses in the instant case, it is amply clear that the clause extracted hereinabove was included in the contract at the moment at which the contract was entered into. It represents the guarantee that the contract would be fulfilled. In other words, 'earnest' is given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls through by reason of the default or failure of the purchaser. There is no other clause militates against the clauses extracted in the agreement dated 29.11.2011."

12. Now, applying the principles of law laid down by Hon'ble the

Supreme Court in Satish Batra's case (supra), to the facts and circumstances

of the present case, wherein a concurrent finding of fact based on proper

appreciation of evidence available on record has been arrived at by both the

courts below to the effect that respondents-plaintiffs were not able to prove

their readiness and willingness to perform their part of agreement in question,

one can trace out that the transaction fell through on account of fault of the

vendee i.e. respondents/plaintiffs. Once that was so, as per terms of the

agreement dated 23.01.2007 (Ex.P-1), the appellant-defendant was entitled

for forfeiture of the earnest money received under the same, based on a

specific covenant to that effect. The translation of relevant portion of the

agreement in question is reproduced hereunder for reference:-

"......In case, the purchasers does not come forward to get the sale deed registered, his earnest money will be forfeited....."

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 RSA-3836-2017 (O&M)                                             --6--

On a perusal of contents of agreement in question, it can be

found that a sum of Rs.5.50 lakhs was paid as earnest money, the remaining

sale consideration was to be paid at the time of registration of sale deed for

which period was fixed up to 10.05.2007. From the portion of agreement

reproduced herein above, one can see through that the payment of earnest

money was to be treated as gurantee with reagard to its performance. Once, it

was established that the respondents/plaintiffs were not able to proved their

readiness and willingness to perform their part of agreement in question and

the transaction fell through on this account, the appellant/defendant was well

within his right to forfeit the amount of earnest money.

13. In view of the discussion made hereinabove, I find that the first

Appellate Court fell into an error of law while allowing the appeal filed at

the instance of respondents-plaintiffs to the extent of refund of Rs.4.50 lakhs

out of the earnest money having relied upon the doctrine of undue

enrichment of appellant-defendant, which was not even made out in the facts

and circumstances of the present case, as the rights of the parties were

strictly to be governed and adjudicted upon under the terms of

agreement/contract entered into between them. The respondents-plaintiffs

even tried to defend the judgment and decree passed by the first Appellate

Court by stating that the sale deed could not be executed/registered in their

favour as there was some dispute about existence of a passage towards the

south of property in question as recorded under the agreement in question. It

was also submitted that in fact, no such passage towards the south of the

property, in question, as alleged under the agreement dated 23.01.2007

(Ex.P-1) was in existence at the spot, which was the prime reason for

non-enforcement of the agreement by them. I am unable to accept the

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aforesaid conention made on behalf of the respondents as the aforesaid

contention, which is purely based on facts did not find favour with either of

the courts below. I am even unable to accept the same in view of lack of

sufficient evidence in this regard.

14. Accordingly, in view of the reasons recorded hereinabove, the

appeal stands allowed, the judgment and decree dated 04.05.2017 passed by

the first Appellate Court is set aside resulting into dismissal of the suit filed

at the instance of respondents-plaintiffs.

15. Pending applications, if any, stand disposed of.

19.12.2022                                        (HARKESH MANUJA)
sonika                                                JUDGE
         Whether speaking/reasoned: Yes/No
         Whether reportable:        Yes/ No




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